PRODUCT GUIDE

					   Trading and Clearing the
Argus Sour Crude Index (“ASCI”)
           with ICE




      PRODUCT GUIDE
                                                ICE ARGUS SOUR CRUDE INDEX (“ASCI”)




IC E n ow o f fe r s 4 U. S . Gulf-related sour crude products to

o i l m a r ke t p a r t i c i p a n t s globally, including:

• 	 Two 	I C E 	OTC 	Arg u s S o ur C r ud e Ind ex (“ASC I” ) sour crude

   d i f fe re n t i a l swa p s (o n a Calendar Month and Trade Month

   b a s i s) , a n d

• 	 Two 	 ICE 	 Arg u s S ou r C r ud e Ind ex (“ASC I” ) Fu tu res (one

   ou tri gh t , o n e d i ffe re ntial)

Th i s g u i d e is intended to provide essential background on the evo l u t i o n
o f t h e U. S. G u l f Co ast so ur c rude m a rket as it relates to ASCI i n d ex ,
a s we l l a s the instruments ICE has made available for partici p a n t s
in t h o s e m ar ke t s fo r t h e p urposes of hedging or trading. Addit iona l
info r m at i o n o n t h e und e r l ying ASCI index component marke t s a re
ava i l a b l e thro ug h t he re so urces highlighted in this guide.


THE ARGUS SOUR CRUDE INDEX (“ASCI”)                               GLOBAL CRUDE PRICING AND BENCHMARKS
According to Argus:                                               There are approximately 550 global crude oil streams that
”The Argus Sour Crude Index (“ASCI”) represents the daily value   can be identified as individual grades with a multiplicity of
of U.S. Gulf coast medium sour crude, based on physical spot      qualities and prices. Only a handful of those grades can be
market transactions. The ASCI index primarily serves buyers       called ‘benchmark’ or ‘marker’ grades. The remainder of crude
and sellers of imported crude that need a broader index of U.S.   oils price as differentials to those few key benchmarks. With
sour crude value for use in long-term contracts.”                 the launch of ICE ASCI™ futures, ICE is able to offer ASCI
                                                                  index sour crude outright and differential futures alongside
The ASCI index is a single price for a basket of three crudes     the two key global light, sweet crude futures benchmarks –
– Mars, Southern Green Canyon and Poseidon. Prices are            West Texas Intermediate (WTI) and Brent - for the first time.
compiled by Argus from their office in Houston. The ASCI          Combined, ICE’s offering allows players to hedge and trade
index is published as a differential to West Texas Intermediate   these contracts as outrights and as differentials to each other,
(WTI) crude oil and as a flat price. A document on the Argus      representing a full spectrum of marker grades relevant to U.S.-
website describes the ASCI index methodology in detail, and       based crude pricing.
is available at: www.argusmedia.com/methodology. More
background on sour grades and their global context is below.
     ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                                                       2



GLOBAL PRICING, GLOBAL OIL FLOWS
Oil as a commodity is produced, transported, and refined all over the world. Figure 1 illustrates many of these key flows, and their
relative size.

FIGURE 1: MAJOR OIL TRADE MOVEMENTS
                                                                                                                      THE   WORLD’S      TWO    LARGEST      CRUDE
                                                                                                                      BENCHMARKS ARE SWEET GRADES, BUT
                                                                         318.5                                        THERE’S A GROWING AMOUNT OF SOUR
                                      43.4                                                       22.4
                                      24.4
                                                                                                                      CRUDE TO PRICE
                                        23.8                                                                          Crude oil can be described in terms of each
               21.7                                                                196.9
                                                  49.5           127.6
                                           90.9
                                                         101.3                                                        grade’s key characteristics as a hydrocarbon,
                                           32.6                                    92.0
                                                                                   9
                 64.7                                                                                                 each of which influences the economic yield
                                        119.7                                      53.1                     20.7
                                                                                                        21.4
                      25.4         119.4                                         107.6                                of that grade in terms of the refined products
                                                                         44.5                     49 2
                                             25.2                                238.3                                that flow from that grade, in addition to where
         US                                                                               38.0
         Canada
         Mexico
                                                                                                                      it is located. Terms like ‘light’, ‘sweet’ and
         S. & Cent. America                                                               20.0
                                                                                                               20.0
         Europe & Eurasia                                                                                             ‘sour’ are used. WTI and Brent, the two most
         Middle East
         Africa
         Asia Pacific                                                                                                  important global crude benchmarks are ‘light
                                                          39.1
                                                                                                                      and sweet’, whereas most of the world’s total
                                                                                                                      crude production, including the ASCI index
Source: BP Statistical Review of World Energy 2009                                                                    component grades (such as Mars, Poseidon
                                                                                                                      and Southern Green Canyon, see below) are
more sour and ‘heavier’ than Brent and WTI, meaning that they are denser and are higher in sulphur by-product, generally making
them less valuable in terms of the products produced in the refining operation. However, much of U.S. Gulf refining capacity has
become well adapted to processing the heavier, more sour grades, and can thus use sour grades that are produced in the U.S.
Gulf or imported from global locales such as the Arab Gulf. As a result, these refiners are able to capture the discounted prices
for sour crudes, relative to lighter, sweeter – and more expensive - grades like WTI and Brent.
                                                                            FIGURE 2: THE BRENT CRUDE FUTURES CONTRACT: BRENT RELATED PRICING WORLDWIDE

For more than twenty years, Brent has been
the dominant global physical marker crude.
West Texas Intermediate, also a light, sweet
grade, has been the central price hub for
crude oil within North America, although
most of the light, sweet crude being imported
is also priced using the North-Sea produced
Brent grade. Brent prices, by reference,
approximately two thirds of all global physical
crude oil produced. Figure 2 below outlines
various crude markers globally and their price
relationship to Brent:


THE U.S. GULF SOUR CRUDE MARKET
The U.S. Gulf is a key region for the U.S. oil industry, providing at least one-third of U.S. domestic oil production, and containing
around half of U.S. refining capacity (see Figure 3 below). It is logical that U.S. pricing should overlay its key infrastructure. The
ASCI index - and pricing against it - represents such an alignment.
     ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                          3



U.S. sour crude production has risen sharply       FIGURE 3: U.S. PETROLEUM REFINERY CAPACITY, BY REGION CRUDE OIL DISTILLATION

over the past few years, boosting interest
in a U.S. Gulf Coast Sour Crude Index. The
increase in oil production in the U.S. Gulf more
specifically has led to a surge in spot market
trading volumes. U.S. Gulf output of about 1.2
million b/d in 2009 is expected to climb to 1.4
million b/d in 2010 and 1.9 million b/d in 2013.


According to the U.S. Department of Energy,
around 7.5 million b/d of crude oil originating
from countries with predominantly sour
crude production were imported in 2008 (see
                                                   Source: Petroleum Supply Annual, Table 36, Biennial Refinery Report
Figure 4 below). This represents close to 75%
of the total average daily U.S. crude imports of approximately 9.7 million b/d (2008). Many of the refiners located in the U.S. Gulf
Coast region have a high degree of upgrading and processing capacity and therefore are specialists in refining sour crude oil.
U.S. Gulf Coast refiners have also increasingly invested in coking facilities which break down residual oils into lighter and lower
sulphur products.

FIGURE 4: U.S. GULF SOUR CRUDE IMPORTS BY COUNTRY AND VOLUME




Source: U.S. Department of Energy


WTI PRICE DISCONNECTION VERSUS OTHER DOMESTIC SWEET AND SOUR CRUDES AND BRENT – THE FEBRUARY 2009
DISRUPTION & PRICING ISSUES FOR THE INDUSTRY
In addition to a greater reliance on U.S. Gulf Coast sour crude, the existing predominant U.S. benchmark – WTI – has experienced
significant dislocation from other major global oil markers over the past several years (see Figure 5). Industry participants
increasingly express concerns over WTI’s physical infrastructure, its delivery and flow constraints, and major storage location in
Cushing, Oklahoma.


In part, as a result of these factors, in November 2009, Saudi Aramco announced plans to stop pricing its output relative to
WTI and begin pricing relative to the ASCI index for January 2010 crude imports to the U.S. Gulf. Much of the momentum for
the Saudi announcement and industry disquiet stemmed from the dislocation of WTI prices from both U.S. domestic and other
international marker grades in 2008 and repeated most dramatically in February 2009.
   ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                           4



So what happened early in 2009? Following are some of the points raised by industry commentators:
•	 The	Cushing	delivery	location	for	WTI	is	a	pipeline	nexus,	with	no	proximity	to	U.S.	Gulf	refiners
•	 A	self-feeding	‘reinforcing	feedback’	of	local	storage	built	up,	doubling	between	December	’08	and	March	‘09	(Adding	30+	
  mil/bbl) to exploit contango price arbitrage available in the market
•	 This	was	allied	to	a	de	facto	one-way	‘lock-in’	effect	of	pipeline	inland	flow	north	out	of	the	U.S.	Gulf	to	Cushing	and	towards	
  the Chicago-based refineries – creating a ‘cash & carry’ arbitrage supply loop as U.S. Gulf – Cushing effectively became
  disconnected, even within the United States, in price terms
•	 Early	2009	saw	extreme	volatility	of	WTI	front	monthly	spreads,	pulling	first	line	flat	prices	down
•	 The	depth	of	contango	overall	and	the	allied	   FIGURE 5: BENCHMARK CORRELATION IN 2008/2009: WTI DIVERGENCE FROM BRENT AND
                                                   DUBAI (First monthly spread)
  instability of term structure became widely
  problematic for many market participants
•	 Collectively,	 these	 factors	 led	 to	 WTI	
  decoupling from other U.S. & international
  crude grades, with Mars (effectively close
  to the ASCI index number) $3/bbl above,
  rather than below WTI. Louisiana Light
  Sweet (LLS), a comparable light sweet
  crude located in the U.S. Gulf, was as much
  as $9.90/bbl above WTI, and a $11.56/bbl
  positive differential for Brent was seen,
  compared to the more normal $1.00-$1.50/
  bbl negative differential


While WTI remains the underlying reference base for ASCI index related sour crude differentials, a possibility exists that the
outright ASCI index price may become more independent of its WTI base, especially if the differentials to WTI continue to be
less stable than the differentials to more globally-traded markers such as Brent.


WHY DOES THE SAUDI PRICING CHANGE MATTER TO THE U.S. OIL MARKETS?
Saudi (generally sour) crude oil forms a large part of the total crude imported into the United States (see imported proportions
in Figure 4 above). Together with the price of WTI (as long as sour crudes continue to be priced in this way), differentials will
continue to be an important part of the overall price of crude oil, ultimately affecting the price products such as heating oil and
gasoline for the U.S. consumer.


Other Arab Gulf producers regard Saudi Arabia as the key bellwether for OPEC decisions, and frequently fall into line behind
Saudi decisions and practice. Saudi Arabia’s break with WTI pricing reinforces the views of some that using sour crude contracts
for pricing sours into the United States is a better mechanism than using WTI futures, whatever the latter’s liquidity, especially
given WTI’s recent dislocations.


This change will likely have knock-on effects for pricing by the very influential Arab Gulf producers, and for the treatment of
other sour crudes such as Urals and Dubai. It may also contribute to Brent becoming even more dominant in global (light sweet)
physical pricing, as WTI’s status in the U.S. is bifurcated by an increasingly independent ASCI index marker. It is likely that OPEC
production will increase in the future, as will Canadian heavy output, especially from unconventional sources such as from oil
shale and oil sands, likely rendering sour crudes an even more important component of the global crude market. The ASCI index
will give importers an identifiable and independent marker for differentials when setting their Official Selling Prices (OSPs), and
      ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                         5



reduce the need for ad hoc proxy calculations between importers and their customers when WTI fundamentals dislocate.


WHAT IS AN OSP?
OSP stands for Official Selling Price and is the mechanism that the majority of the Middle Eastern producers use to sell their
crude oil. This is generally set on a monthly basis and the producer will use a variety of similar crude price references to calculate
the OSP. In the case of the Saudis, they will generally use the prices of Mars, Venezuelan and Iraqi Basrah Light as a guide for
setting the OSP.


THE ASCI INDEX SOLUTION
Given the growing criticism of WTI as a ‘broken’ benchmark, and the need for both suppliers and customers to negotiate pricing
differentials to WTI, participants have been looking for alternative U.S. benchmarks. As a result, the Argus index, was created to
provide a potential alternative for establishing such differentials (Figure 6).
1.    What is the ASCI index?
      The ASCI index is a single price for a basket of three crudes – Mars, Southern Green Canyon and Poseidon. Prices are
      compiled by Argus from their office in Houston. The ASCI index is published as a differential to WTI and as a flat price.
2. How is the ASCI index calculated?
      The Argus Sour Crude Index (“ASCI”) is a trade weighted index using trades in the underlying three grades – Mars, Southern
      Green Canyon and Poseidon. The WTI component, to which the differential is added, is assessed at 14:30 EST. The differentials
      continue to be assessed up to and including 16:00 EST with the final price published by 18:00 EST.


FIGURE 6: HISTORICAL PRICING DATA FOR ASCI VERSUS WTI AS A DIFFERENTIAL               ASCI INDEX COMPONENT SOUR CRUDE
                                                                                      GRADES
                                                                                      Three physical grades are used in the
                                                                                      compilation of the Argus Sour Crude Index
                                                                                      (“ASCI”). This helps to enhance its robustness
                                                                                      for deriving an effective settlement price on
                                                                                      which to base a futures [or over-the-counter
                                                                                      swaps] market. The three grades, Mars,
                                                                                      Poseidon and Southern Green Canyon have a
                                                                                      combined daily production of close to 1 million
                                                                                      b/d with spot trade regularly exceeding 50%
                                                                                      of the total daily production, according to
                                                                                      Argus. The Argus Sour Crude spot market
                                                                                      trade is 7 times larger than the equivalent
                                                                                      for Dubai and almost double the size of both
Source: Argus                                                                         Urals markets combined (Source: Argus ASCI
                                                                                      White Paper).


•	 Mars: Mars is the crude stream with the highest volume of the three grades, producing around 350,000 b/d in September
     2009 according to the field operator website www.marscrude.com. The blend primarily comes from the Mars field, which is
     operated by Shell with BP as a minority partner. The other field in the system is called Ursa and is also operated by Shell with
     BP, ExxonMobil and Conoco as minority partners. The Mars field, which lies in the Gulf of Mexico about 130 miles southeast
     of New Orleans, is connected via the Equilon-operated pipeline to the Clovelly storage facility that is part of the Louisiana
     Offshore Oil Port (LOOP).
      ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                      6




•	 Southern Green Canyon: Daily volumes are estimated to be around 230,000 b/d with the largest share coming from the
     Atlantis field, according to the website www.cameronhighwayoil.com). The Atlantis field is operated by BP with BHP Billiton
     as a significant equity holder. The other fields in the system include Holstein and Mad Dog (100,000 b/d). Output from the
     Atlantis, Holstein and Mad Dog fields is shipped via the Cesar Oil pipeline, operated by the Mardi Gras Transportation system,
     to the Cameron Highway Offshore Oil Pipeline system which will transport the oil to the Gulf Coast refineries.
•	 Poseidon: Production currently stands at about 225,000 b/d. Like the Mars and Southern Green Canyon fields, Poseidon is a
     pipeline network. Enterprise Products Partners have a 36% share, as do Shell Pipeline Company. Marathon has a 28% stake in
     the field.


WHAT TYPE OF PRICING IS RELEVANT TO AND CAPTURED BY THE ASCI INDEX, AND WHAT TYPE OF TRANSACTIONS ARE
LIKELY IN ASCI INDEX RELATED PRODUCTS?
It is likely that market participants may trade and hedge around the 5 or 10 day pricing and trading windows for monthly OSP-
related Arab Gulf, imported cargoes into the U.S. Gulf for dates around the 25th-30th of each month or between the 25th and
the 5th of the following month in calendar terms. (These represent the first 5 or 10 days of a trade month, by which the physical
nominations to move landed crude by inland pipeline are organized).


It is possible that increasingly flexible contract terms may become more common as importers and refiners use more monthly
average pattern contracts (popular elsewhere in oil markets), which will appeal to many refiners, as it reduces price volatility and
increases logistical and price options. If other Arab Gulf countries such as Kuwait, and more openly-traded Iraqi grades follow
suit, interest will increase further in ASCI index outrights and differentially-traded pricing.


Inter-month spreads in either OTC markets or futures differential and outright contracts will allow hedgers to move their price
exposure along the timing curve as their physical requirements change. These contracts will also enable traders to take a view on
price evolution in relative domestic sweet/sour differentials at different points along the forward price curve, and also in relation
to such global sweet markers as Brent.


Trading against the outright future or differential can also allow market participants to take a view on outright sour crude prices
in a key production, refining and import region of the United States, and a sweet/sour differential which marks one of the major
global spreads of its type. Sweet/sour spreads represent a play on the input costs of simple against complex refining, and of the
likely output levels of OPEC heavier, more sour crudes against other sections of global crude output. In short, many key refining
and production margins are available through such instruments and related WTI and Brent products.
                                                      FIGURE 7: ASCI INDEX (Outright)

TRADING IN ICE ARGUS SOUR CRUDE INDEX
(“ASCI”) FUTURES AND OTC SWAPS
1.    Outright: The ICE Argus Sour Crude Index
      (“ASCI”) future allows market participants
      to hedge or trade around the outright flat
      price of a representative basket of U.S. Gulf
      sour crudes. Participants will be able to
      match the exposure of U.S. Gulf-produced
      or U.S. Gulf-delivered sour crudes with a
      single instrument (Figure 7).
2. Inter-commodity        spreading:    The    ICE
                                                      Source: Argus
   ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                         7



   Argus Sour Crude Index (“ASCI”) Differential Future and ASCI Index Differential OTC Swaps represent a first order inter-
   commodity quality spread, a direct spread between U.S. Gulf sour crude prices and Mid-continent WTI light sweet crude
   prices (see Figure 8 below). These can be traded on ICE in an OTC swap form as differentials over a calendar month period,
   or as trade months, with the ’bullet’ differential future providing such pricing and trading facility in a futures environment.
                                                                                      3. The ICE Argus Sour Crude Index (“ASCI”)
FIGURE 8: ARGUS SOUR CRUDE INDEX vs WTI
                                                                                      Future versus ICE Brent Future as a flat price
                                                                                      against a flat price will also represent an
                                                                                      additional global sweet/sour differential to
                                                                                      be traded in any single maturity, or via boxes
                                                                                      to be traded or hedged against ICE Brent
                                                                                      across any chosen part of these two crude
                                                                                      benchmarks’ respective forward curves.
                                                                                      4. Intermonth spreading: ICE Argus Sour
                                                                                      Crude Index (“ASCI”) intermonth spreads
                                                                                      in the ICE Argus Sour Crude Index (“ASCI”)
                                                                                      Differential Future will enable participants to
                                                                                      trade around their forward view of how this
                                                                                      important sweet/sour differential will evolve
in price terms, which can be affected by:
a. global fundamental factors in oil, the overall economic outlook,
b. the proportion of OPEC (sourer) crudes within the overall crude production picture,
c. the relative demand for light-end against middle-distillate products,
d. the quantity of oil in storage, and
e. the relative fundamentals of the U.S. Gulf against Mid-continental conditions, among others, at different points in time.


WHAT ARE THE IMPLICATIONS OF THESE CHANGES FOR THE BRENT MARKET?
As third-party commentators have said, the ASCI index does not offer a threat to ICE Brent as the leading global physical light,
sweet crude marker price. Although Brent is a light, sweet crude, unlike WTI, Brent has a number of factors that differentiate it
from WTI to make it a uniquely successful global benchmark:


Brent is a seaborne, globally traded and referenced physical crude. Because WTI cannot be traded and transported outside of
the United States, WTI cannot truly reflect global underlying physical fundamentals as efficiently.


Additional jurisdictions, such as Australia, are increasingly using Brent as a pricing reference, particularly in Asia.


Physical Brent is closer to the ASCI index component grades in specification than WTI, and as a stream has become more sour
as the Buzzard field has been added to Forties, forming part of the wider Brent complex.


ICE Brent already trades on a differential basis to Dubai, the most popular sour crude marker in Asia, and there is every reason
to expect ASCI index instruments to also trade and price in reference to ICE Brent in a similar manner. The two sweet/sour
differentials: ICE Brent/Dubai and ICE Brent/ASCI index may well compete to be the dominant global sweet/sour differential, as
they represent key pricing ‘bridges’ globally.


The following charts (Figure 9 and Figure 10), together with Figure 5 above, demonstrate that Brent’s pricing behavior has
   ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                       8



remained within expected norms against key global references, while WTI has periodically disconnected. Figures 9 and 10 also
show Brent’s relative price stability, and price ‘bridge’ status between WTI and the U.S. Gulf sour crudes. Arguably ship borne
Brent is often more closely correlated with U.S. Gulf sours than their U.S. light sweet equivalent, WTI, which is of relevance when
an increasing proportion of the sour crude volume is being priced in terms of ship borne, imported, and hence internationally-
traded crude.
                                   FIGURE 9: ASCI INDEX CORRELATIONS - BRENT, WTI & WTI (Mars as Proxy)




                             FIGURE 10: ASCI INDEX CORRELATIONS - BRENT, WTI & WTI (5-day av. prices and trend)
   ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                            9



SUMMARY
THE ICE ARGUS SOUR CRUDE INDEX (“ASCI”) PRODUCT RANGE
•	 ICE	Argus Sour Crude Index (“ASCI”) Futures Contract Specifications
  https://www.theice.com/productguide/ProductDetails.shtml?specId=1428
•	 ICE	Argus Sour Crude Index (“ASCI”) Differential Futures Contract Specifications
  https://www.theice.com/productguide/ProductDetails.shtml?specId=1430
•	 ICE	Argus Sour Crude Index (“ASCI”) Differential Trade Month Swap Specifications
  https://www.theice.com/productguide/ProductDetails.shtml?specId=1427
•	 ICE	Argus Sour Crude Index (“ASCI”) Differential Calendar Month Swap Specifications
  https://www.theice.com/productguide/ProductDetails.shtml?specId=1426


ICE ARGUS SOUR CRUDE INDEX (“ASCI”) FUTURES AND DIFFERENTIAL FUTURES
ICE launched the ICE Argus Sour Crude Index (“ASCI”) Futures Contracts to:
•	 Create	a	liquid	sour	crude	benchmark	to	compliment	its	existing	ICE	Brent	and	ICE	WTI	Futures	contracts.	This	will	provide	
  participants with the opportunity to access some of the most liquid global oil grades in a single electronic marketplace;
•	 Facilitate	trading	in	the	ASCI index/Brent and ASCI index/WTI Futures spreads;
•	 Provide	market	participants	margin	offsets	where	possible	between	the	ICE	Brent	Crude	Futures	contract,	the	ICE	WTI	Crude	
  Futures contract and the ICE Argus Sour Crude Index (“ASCI”) Futures contract; and
•	 Allow	market	participants	to	manage	exposure	to	either	the	differential	to	WTI	or	the	flat	price.


Only ICE can offer both ASCI index futures (outright and differential) alongside WTI and Brent futures via a single electronic
platform. The four futures combined allow multiple trading and hedging opportunities in the three key grades of crude oil, as well
as spreading across grades and time periods.


Details of each of the ICE Argus Sour Crude Index (“ASCI”) products are available via the following links:


ICE Argus Sour Crude Index (“ASCI”) Differential OTC Swaps
In addition to the two ICE Argus Sour Crude Index (“ASCI”) futures, ICE also offer cleared differential swaps against the ASCI
index differential (to WTI) in both calendar month and trade month tenors.


These allow trades and hedgers of ASCI index related sour crudes to:
•	 Hedge	and	trade	around	ASCI index related differentials in either calendar month or trade month pattern;
•	 Match	current	or	future	physical	contract	terms	as	they	see	fit;
•	 Utilize	 logical	 margin	 offsets	 against	 other	 relevant	 OTC	 markets	 such	 as	 WTI	 first-line	 swaps,	 Brent	 and	 Brent/Dubai	
  instruments to maximize capital efficiency


ICE Clearing
Summary of ICE OTC Cleared Oil and other energy products:
•	 ICE	offers	over	100	cleared	OTC	oil	products	across	all	major	global	crudes	and	refined	products	in	both	outright	form	and	as	
  differentials. Please use the following link to reach a full list of ICE cleared OTC oil products


More ICE Crude Oil and Refined Products
    ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                                  10



ICE OTC CLEARING: WHY AND HOW?
Elimination of Counterparty Risk
•	 OTC	 clearing	 virtually	 eliminates	 counterparty	 risk	 associated	 with	 traditional	 bilateral	 trades.	 The	 clearing	 house	 acts	 as	 a	
  central counterparty for all trades. Clearing gives market participants the security of futures transactions with the flexibility of
  OTC markets
•	 Margining	removes	the	daily	rigor	of	back	office	processes	associated	with	bilateral	trades	via	letters	of	credit.	It	outsources	
  collateralization to a guaranteed and financially secure third party
•	 By	carrying	both	sides	of	the	transaction,	the	systemic	risk	is	naturally	diversified,	while	conservative	volatility-based	margining	
  provided by the clearing house creates security for all involved


Increased trading opportunities
•	 Deferring	 to	 cleared	 business	 eliminates	 operational	 distractions	 and	 complexity	 related	 to	 bilateral	 credit	 issues	 around	
  trading and hedging
•	 Participants	benefit	from	the	fact	that	OTC	trades	are	centrally	cleared,	freeing	the	use	of	bilateral	credit	lines	-	opening	up	a	
  larger and broader universe of market participants, including those who might otherwise be excluded


Efficient capital flows
•	 Clearing	satisfies	increasingly	rigorous	capital	requirements	placed	upon	market	participants	by	regulators	and	policymakers
•	 A	trader	who	has	reached	his	own	desk	limits	in	capital	terms,	but	who	sees	a	promising	trading	opportunity,	can	add	additional	
  exposure with no further credit exposure, if the marginal OTC position is sent for clearing, rather than added to a bank’s or
  trading firm’s own net credit position


Streamlining back office operations
•	 Offsets	 between	 exchange-traded	 and	 bilateral	 OTC	 instruments	 to	 a	 single	 clearing	 house	 allow	 reduced	 capital	 reserve	
  requirements and margin, reduced confirmation errors, and other back office bottlenecks
•	 Clearing	provides	settlement	values,	aiding	price	discovery	and	risk	monitoring	via	objective	fair-value	mark-to-market	for	OTC	
  markets
•	 The	posting	of	initial	and	variation	margin	through	clearing	houses	ensures	a	degree	of	security	of	performance	and	payment	
  that cannot be matched by even the most highly secure single counterparties in the bilateral OTC trading realm


WHY CLEAR WITH ICE?
Global market synergies
•	 If	a	customer	is	trading	ICE	oil	futures	such	as	Brent,	WTI	and	Gasoil,	it	makes	sense	to	also	clear	strongly	correlated	instruments	
  offering related OTC bilateral exposure to such global benchmarks through the same clearing house and thus get the benefit
  of direct cross-margining and offsets across screen-traded and bilateral markets, for the most efficient and operationally
  simple employment of capital in trading and hedging energy
•	 Companies	actively	trading	the	energy	complex	across	diverse	derivative	products	in	Brent,	WTI,	Gas[oil]	and	Emissions	will	
  significantly benefit from related efficiencies across trade capture, confirmation, margining and reconciliation


State of-the-art cross-margining optimizes capital efficiency
•	 Margin	offsets	between	screen-traded	futures	and	bilaterally	matched	OTC	markets	of	up	to	95%	are	available	to	ICE	Clear	
  customers in markets such as oil inter-commodity spreads
•	 Back	office	processes	are	simplified	and	reconciliations	easier	to	process	via	a	single	clearing	house	that	handles	ICE	on-screen	
  execution and clearing of related OTC instruments
   ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                     11



Rational margins
•	 ICE’s	settlement	curves	used	for	margining	such	bilateral	instruments	are	independently	and	directly	sourced	from	a	pool	of	
  established major trading entities, and considered highly reliable for margining purposes establishing true fair value


CONCLUSION
The decision to switch pricing to the ASCI index by such a significant U.S. Gulf importer likely marks a period of increasing
reflection and uncertainty for U.S. domestic crude pricing, especially of sour crudes of the type that comprise the ASCI index.
WTI remains the major U.S. domestic light sweet benchmark, and a key underpinning of the ASCI index. Brent continues to grow
in significance as the most common international physical crude benchmark, and is continuing to enhance its significance in
pricing.


The ICE Argus Sour Crude Index (“ASCI”) product offering allows traders and hedgers in any and all of these markets to access
all, and intervening spreads and differentials at a single point of delivery, and to maximize clearing, processing and capital
efficiencies through one provider.




For more information please contact:

US: Jeff Barbuto                            Europe: Paul Wightman                        Asia: Jennifer Ilkiw
+1	646	733	5014                             +44	(0)20	7065	7744                          +65	6594	0161
Jeff.Barbuto@theice.com                     Paul.Wightman@theice.com                     Jennifer.Ilkiw@theice.com


US: Yvonne Betts                            Europe: Deborah Pratt                        Asia: Julius Foo
+1	713.890.1224                             +44	(0)20	7065	7734                          +65	6594	0162
Yvonne.Betts@theice.com                     Deborah.Pratt@theice.com                     Julius.Foo@theice.com
     ICE ARGUS SOUR CRUDE INDEX (“ASCI”)                                                                                                                                   12


ABOUT ICE                                                                                                ICE FUTURES EUROPE REGULATION vs ICE FUTURES U.S.
IntercontinentalExchange® (NYSE: ICE) operates leading regulated                                         ICE Futures Europe is a Recognised Investment Exchange in the UK,
exchanges, trading platforms and clearing houses serving the global                                      supervised by the Financial Services Authority under the terms of the
markets for agricultural, credit, currency, emissions, energy and equity                                 Financial Services and Markets Act 2000. As a consequence, the ICE
index markets. ICE Futures Europe® hosts trade in half of the world’s                                    platform supports an orderly, regulated futures market thanks to its
crude and refined oil futures. ICE Futures U.S.® and ICE Futures Canada®                                 wide availability, open participation and complete documentation of all
list agricultural, currency and Russell Index markets. ICE® offers trade                                 orders. ICE operates its sales and marketing activities in the UK through
execution and processing for the credit derivatives markets through                                      ICE Markets which is authorized and regulated by the Financial Services
Creditex® and ICE LinkTM, respectively, and CDS clearing through ICE                                     Authority as an arranger of deals in investments and agency broker.
Trust™. A component of the Russell 1000® and S&P 500 indexes, ICE
serves customers in more than 50 countries and is headquartered in                                       ICE OTC REGULATION
Atlanta, with offices in New York, London, Chicago, Winnipeg, Calgary,                                   ICE operates its OTC electronic platform as an exempt commercial
Houston and Singapore. www.theice.com                                                                    market under the Commodity Exchange Act and regulations of the
                                                                                                         Commodity Futures Trading Commission, (CFTC). The CFTC generally
LEADING ELECTRONIC TRADING PLATFORM                                                                      oversees the trading of OTC derivative contracts on the ICE platform.
ICE’s electronic trading platform provides rapid trade execution and                                     All ICE participants must qualify as eligible commercial entities, as
is one of the world’s most flexible, efficient and secure commodities                                    defined by the Commodity Exchange Act, and each participant must
trading systems. Accessible via direct connections, telecom hubs, the                                    trade for its own account, as a principal.
Internet or through a number of front-end providers, today, ICE offers
a 3 millisecond transaction time in its futures markets – the fastest in                                 As an exempt commercial market, ICE is required to comply with the
the industry. ICE’s platform is scalable and flexible – which means new                                  access, reporting and record-keeping requirements of the CFTC. ICE’s
products and functionality can be added without market disruption.                                       OTC business is not otherwise subject to substantive regulation by
ICE offers numerous APIs for accessing futures and OTC markets,                                          the CFTC or other U.S. regulatory authorities. Both the CFTC and the
including a FIX API.                                                                                     Federal Energy Regulatory Commission have view-only access to the
                                                                                                         ICE trading screens on a real-time basis.
INTEGRATED ACCESS TO GLOBAL DERIVATIVES MARKETS
ICE’s integrated marketplace offers futures and OTC, cleared and                                         GETTING INVOLVED
bilateral products on a widely-distributed electronic platform that                                      To learn more about ICE markets, products, and services, view a list of
provides quick response times to participants’ needs, the changing                                       ICE Education programs or download a copy of the ICE capabilities
market conditions and evolving market trends.                                                            brochure. To contact ICE, choose from a complete list of ICE contacts
                                                                                                         or call ICE Futures Europe.
TRANSPARENCY
Price transparency is vital to efficient and equitable markets. ICE                                      A complete list of specifications is available at: https://www.theice.
offers unprecedented price transparency and ensures that full depth                                      com/productguide/productDetails.action?specId=909
of market is shown. Trades are executed on a first-in/first-out basis,
ensuring fair execution priority. ICE also displays a live ticker of all deal
terms and maintains an electronic file of all transactions conducted in
its markets.




                            web        theice.com                            | telephone +44	(0)20	7065	7700
This brochure serves as an overview of the Brent and WTI futures and options markets of ICE Futures Europe. Examples and descriptions are designed
to foster a better understanding of the Brent and WTI crude oil futures and options market. The examples and descriptions are not intended to serve as
investment advice and cannot be the basis for any claim. While every effort has been made to ensure accuracy of the content, ICE Futures Europe does
not guarantee its accuracy, or completeness or that any particular trading result can be achieved. ICE Futures Europe cannot be held liable for errors
or omissions in the content of the brochure. Futures and options trading involves risk and is not suitable for everyone. Trading on ICE Futures Europe is
governed by specific rules and regulations set forth by the Exchange. These rules are subject to change. For more detailed information and specifications
on any of the products traded on ICE Futures Europe, contact ICE Futures Europe or a licensed broker.

IntercontinentalExchange is a Registered Trademark of IntercontinentalExchange, Inc., registered in the European Union and the United States. ICE
is a Registered Trademark and Marque Deposees of IntercontinentalExchange, Inc., registered in Canada, the European Union, Singapore and the
United States. ICE Futures U.S. and ICE Futures Europe are Registered Trademarks of IntercontinentalExchange, Inc., registered in Singapore and the
United States. ICE Clear U.S. is a Registered Trademark of IntercontinentalExchange, Inc., registered in the European Union, Singapore and the United
States. Russell 1000 is a Registered Trademark of the Frank Russell Company. U.S. Dollar Index is a Registered Trademark of ICE Futures U.S., Inc.,
registered in the United States. USDX is a Registered Trademark of ICE Futures U.S., Inc., registered in Japan and the United States.

“Argus”, “Argus Sour Crude Index” and “ASCI” are trade marks of Argus Media Limited and are used under license. All intellectual property rights in
the Argus indices referred to herein belong to Argus Media. Argus Media accepts no liability to third parties arising from or in connection with any
use of the Argus indices.

				
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